G20 OTC derivatives reforms stall in filling remaining gaps

The latest report from the Financial Stability Board finds although overall implementation is “well advanced”, annual progress remains incremental when it comes to completing the final steps.

The Financial Stability Board (FSB)’s latest report on OTC derivatives reforms across the G20 has found that while overall implementation across the 24 FSB member jurisdictions of the G20’s over-the-counter (OTC) derivatives reforms was well advanced by 2021, only incremental annual progress is being seen in filling in the remaining gaps in implementation.

Looking at trade reporting, 96% of FSB member jurisdictions (all but one) now have full trade reporting requirements in force. The remaining jurisdiction does, however, have ongoing preparations for authorising a trade repository.

FSB stated that some jurisdictions have further strengthened the functioning of trade repositories and the reporting requirements.

With respect to platform trading, the number of jurisdictions with platform trading requirements in force remains unchanged at 13. Similarly, the number of FSB members that have central clearing requirements remains unchanged at 17. FSB found that several jurisdictions are taking steps toward implementation of mandatory central clearing, including the authorisation of a central counterparty (CCP) within the jurisdiction.

18 FSB member jurisdictions have higher final capital requirements for non-centrally cleared derivatives (NCCDs), an increase from 15 last year. All FSB member jurisdictions now have interim higher capital requirements for NCCDs in force.

In respect to margin requirements for NCCDs, the number of jurisdictions with requirements in force remains unchanged at 16. FSB stated that two jurisdictions published final standards and three jurisdictions expect to implement the requirements next year.

By September 2021, FSB noted that most jurisdictions had already withdrawn or not extended measures introduced in response to Covid-19 to alleviate the operational burden for OTC derivatives markets, or embedded changes to limit and mitigate excessive procyclicality into permanent supervisory frameworks.

Since then, there have been reports of a few further withdrawals of temporary measures, as well as one case of temporary measures that have since expired.

The FSB first implemented its sweeping set of reforms following the global financial crisis in 2008, and continues to designate OTC derivatives as one of its priority areas for implementation monitoring.